I have often regretted my cautious approach towards the Indian stock market. But I have never rued my decision to forego the shares of the public sector oil refining and marketing entities — Indian Oil (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL).

The poor performance of the stocks of these companies is easy to explain. It is because the government will not allow them to recover the costs of acquiring and manufacturing petrol, diesel, LPG and kerosene. It is disturbing to behold because it highlights the attenuated nature of petroleum sector reforms, indifference towards good corporate governance and the weakening props of our decision-making system.

IOC, BPCL and HPCL are listed companies. The non-government shareholders own 18 per cent, 33 per cent and 49 per cent of their equity respectively. The share price of these companies on March 31, 2004, was Rs 496 (IOC), Rs 478 (BPCL) and Rs 507 (HPCL). The BSE sensex was 5590. Three and a half years later on October 30, 2007, the BSE sensex closed at 19783. The share price of IOC was, however, down to Rs 467; BPCL to Rs 347 and HPCL to Rs 238.

I have done a crude calculation of the consequential loss to the non-government shareholders. It is around Rs 6,000 crore. Specifically, investors in IOC have lost Rs 361 crore; in BPCL, Rs 1,218 crore and in HPCL, Rs 4,006 crore. This is the nominal value of the erosion in their net worth. The opportunity loss is significantly greater. Had the share price of these companies risen at just 50 per cent of the rate at which the sensex rose during this period — in my view a conservative suggestion as they have monopoly control over essential products in a growing economy — the private shareholders would have been wealthier to the extent of around Rs 21,000 crore. To add grist to this grim picture, their closest private sector competitor, Reliance Industries, saw a quintupling of its share price from Rs 538 to Rs 2,770 during this timeframe.

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